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Standing on the New York stage, Michael Seton couldn’t help but smile.
The moment was big, one of the biggest for his 14-year-old company, Sila Realty Trust.
It was June 13 and the firm had just officially been added to the New York Stock Exchange. Seton, along with the company’s board and executives, stood on the stage as traders on the floor below clapped after the bell rang; the image was beamed to the financial networks.
It’s a tradition, a rite of passage, for companies joining the exchange. It’s a moment to be celebrated for the work that got you there and a breather from the work that lies ahead.
Seton, 51, was taking it all in.
“It's been a 14-year process,” says the company's president and CEO. “We've gone through a lot of developments to get to that point and it's a little bit of a pinch me moment, right? Where you don't realize what's really occurring.”
A few seconds later he adds: “At that moment, I think to a degree, you see it and it's surreal. Because people don't really do this in their lifetime. Most people, never. And if they do, a lot of times it's as a member of a company so they might be on the floor. Or maybe they're lucky enough to be on the stage. But certainly not as the CEO.”
Sila is a Tampa-based “pure play” net lease health care Real Estate Investment Trust (REIT). It has a $2.1 billion portfolio made up 136 properties and two undeveloped land parcels located in 64 markets across the U.S. As of March 31, it has $590 million in liquidity and a net debt leverage ratio of approximately 20.5%. It has $500 million in capital available under its operating lines.
The company was previously Carter Validus Mission Critical REIT and Carter Validus Mission Critical REIT II. It merged in 2019 and became Sila.
Seton, with a background is in real estate banking, was co-CEO of both firms and took over the top job after the merger. The partners he started the firm with have since left.
In 2021, Sila made a strategic decision to focus solely on the health care sector, selling off a 29-property data center portfolio for $1.32 billion. The firm used the proceeds to pay off $854 million in debt, and the company’s board approved a special distribution of $1.75 per common share with the balance.
By shifting focus to a sector that Seton projects will keep growing, Sila took a big step toward getting itself listed on the NYSE. Investors, he says, like companies that concentrate on a single sector.
And the health care sector is strong. “It's defensive, but it's growing,” he says.
“Everybody always says, ‘People are getting older.’ Why do people then like the health care industry? Because there's going to be more money flowing into the health care industry. So that ultimately should help our tenants. And we rely on those tenants to pay us rent for our durable income streams.”
While Sila has been a public company for years, the NYSE listing will allow its stock to be traded on a much larger scale, opening it up to a huge capital infusion and enhancing its Wall Street credibility.
The Business Observer spoke with Seton five days after the company rang the opening bell at the NYSE. Edited excerpts:
“We have an enterprise value today of approximately $2 billion and we have had, prior to the listing, over 60,000 stockholders in the company. So, we are a public company, we were just not publicly traded. We are an SEC registrant, we file all of the 10Ks, Qs, proxies just like any publicly traded company, but our stock was not readily tradable. We always had a goal to bring liquidity to our stockholders or have the option of liquidity. By listing on the New York Stock Exchange, it gave the optionality to our existing over 60,000 stockholders to sell their stock should they desire. Some will, most won't, but at least it puts it back in the hands of the shareholders who own the stock to decide if they want to continue with us longer term or they would like to realize on their investment now. That was the basic premise.
“The second part of it, an important part of this, is in order to maximize long term value of the company, we ultimately had to have an ability to access what we call scale capital. Scale capital is equity. We can always borrow more money, but then, at some point, you become over leveraged, right? And we're very under-leveraged because we believe in a low-to-moderate, conservative leverage profile. But we didn't have an additional ability to raise equity. Now that we're publicly traded, we can raise equity much more easily in the marketplace. Then it's just a question of at what price. But, because we're publicly traded, there are buyers who will be interested in owning our stock.”
“It was a yearslong process. We could have also gone other avenues with the company, but we felt that listing the company as opposed to selling or merging the company would ultimately give both the optionality (for) the stockholders to sell, but optionality also to stockholders to stay in and ultimately realize greater value long term.
“But that it's not an overnight process is the point. It takes a long time. We sold those data centers, we only own health care properties today. We refreshed our board with a board of directors who is appropriately representative of a board of directors of a publicly traded company in terms of background, in terms of skill set. We did that over the last three years. We also refashioned our management team. Obviously, I've been here a long time, our CFO has been the same CFO since 2018. But we brought in another person in the senior leadership team as our chief investment officer who had been in the banking industry for almost 25 years and very prolific in the REIT space to join us.
“In retrospect, our timing was very good in terms of making a lot of these changes. And ultimately, we think our timing will be good in terms of also an entry point for folks to buy our stock today and ultimately recognize long term value.”
“There are downsides and there are upsides...we think the upside far outweighs the downside.
“The downside is it brings more scrutiny of what we're doing as a company. However, the upside is it brings more visibility. So what does that visibility bring? The visibility brings access to capital to be able to scale the company up, to further diversify our portfolio, to grow our portfolio, to ultimately realize more shareholder value.
“I think we don't have a concern about being publicly traded because we've run this company, from a transparency and disclosure perspective, as a publicly traded company for a long period of time. We've always put shareholders first. If you look at our public filings, our supplemental packages, which come out with our 10Q every quarter and our 10K at years-end, those are very detailed and tell you a lot about the company. That's not typical of companies that are not traded. When we were non-traded, we still did those things.
“Activists are a concern. But they should only be a concern if we're not making the best decisions. I think if we do our job the way we intend to do it, that should not be an issue for us. It’s culture. It’s business decisions. It's business acumen. It's ultimately running the company as a good fiduciary, frankly. I mean, if we're running the company as a good fiduciary, there should not be need for an activist, right?”
“I the think key to institutional environments is structure, accountability, transparency. And so that's really how we run our company. Our core value is the acronym HI ACT — which is humility, integrity, accountability, communication and teamwork. And the most important is humility, which is the first one.
“The reason is, you need great communication to have a good company, a well-oiled machine. You need to have teamwork because not one person can do the job of an entire company. Accountability is critical. I make a mistake, I say, “I made a mistake.” It allows you to move on. And accountability requires people to take ownership of things. What that does is empower people. If you have ownership of nothing, you don't feel empowered. Empowering people is critical.
“Integrity, that goes without saying in our business, right? I mean, you don't lie, you don't cheat, don't steal, right. But we always say that’s an easy one.
“But humility is the biggest one because that, to me, means one thing which is you're putting the job and the company before yourself. That doesn't mean you put the job before family or health. But you're putting the company first in the job. You're not putting yourself and the ego first, (being) territorial or those kinds of things. That, to me is critical.
“But I have to exhibit all these qualities. How can I expect other people in the company not to if I don't? That's really key for me.”
“The board always says to me that they don't worry about me doing the right thing by the company. Because it's ingrained in me. It’s from my father. (Seton's father, an immigrant from Czechoslovakia, came to the United States when he was 19.) You don’t steal. You pay your bills. The basic stuff that I think gets lost a little bit today. Treat people with respect, be honest. Because what’s the worst thing about being honest? You live with the consequences. Guess what? The consequence, unless you do something horrendously bad, don't last for long. People will forget as long as you fess up. You move on. It allows you to move on. We all make mistakes, we learn from our mistakes. It's not that we haven't made them. The question is, what we learned from them.
“That culture, that mentality, it's ingrained in me. It's not hard for me. Because there's something my father always said, ‘It is easier to do the right thing in life than the wrong thing. Because you don't have to look over your shoulder.’”
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